Is It Possible to Negotiate With the IRS?
It’s that time of year again: tax time. You may find yourself in the unpleasant situation of owing more in taxes than you can now pay with the April 15 personal income tax filing and payment deadline. If this is the case, don’t give up; there are many options for negotiating with the Internal Revenue Service (IRS) to assist you in addressing your taxes. If you’re lost, here’s a summary of where to begin.
You must demonstrate your inability to pay.
To apply for an OIC based upon “doubt as to collectibility,” you should demonstrate to the IRS that they will be unable to collect all of the taxes you owe before the time limit expires. The collection statute expiry date usually is ten years after the IRS charges you (or “evaluates”) the taxes.
This indicates that your net value in your assets (home, 401(k), savings, assets, and so on) plus your monthly disposable income (average monthly payment less permitted monthly living costs) is less than the tax you owe.
Whatever you do, be sure you file on time.
What is the most significant point on which the IRS and tax experts agree? It would be advantageous if you did not disregard the filing date, regardless of your capacity to pay in full. However, because of fees and interest, this will simply increase your overall debt.
If you didn’t anticipate owing money, waiting until the evening of April 14 might be a nasty shock. Alternatively, if the sum you owe exceeds your current savings, the sooner you file your taxes, the earlier you’ll know whether you owe money. You should also submit your taxes, even if you cannot fully pay your debt. There is a penalty for failing to file (and separate penalties for late payment).
Even if you don’t have the whole amount available to pay when you file, it’s beneficial to do so. For example, suppose you have a filing obligation and outstanding balance, fail to submit that return and leave that amount owing. In that case, the penalty is substantially higher than filing a tax return but not completely paid. Being proactive when it comes to taxes is always a good idea. You will minimize your overall tax payment if you can pay a fraction of the tax owed. Even a tiny amount is preferable to nothing; even if you can’t afford a small price, submitting your taxes is preferable to not filing.
We suggest contacting the IRS through its website, irs.gov since you will get the quickest answer. Calling is another option. However, you may face significant wait periods if you phone or book an in-person appointment. The IRS website provides information for people unable to pay their taxes in full, including four important options: online payment arrangement, installment agreement, postponing collection, and present in compromise. Getting in touch with the IRS over the phone may be difficult, and when you may encounter long wait times, you should make use of the tools and information provided on the IRS website.
Agree on a payment plan.
As soon as you figure out you cannot pay your tax due in full; you should negotiate with the IRS to arrange a payment plan. When you know you’ll have a problem delivering your taxes, the next step is to find out the best way to pay those taxes.
The IRS will want all your financial information when you submit an offer in compromise. Therefore, have your tax return, pay slips, lease or rental contract, mortgage statements, vehicle loan statements, utility bills, credit card, other debt statements, and bank statements on hand. In summary, if your documentation is in order, you may be able to have some of your debt forgiven.
But please be aware that OICs are uncommon.
More than 16 million taxpayers owe the IRS, yet only 25,000 received an OIC in 2017. Consequently, most individuals are better suited to pursuing alternative IRS choices, such as IRS payment plans or “currently not collectible status” – when your authorized costs exceed your monthly income.
Your scenario is one-of-a-kind.
If you owe more than $10,000, a professional CPA or tax attorney can help you work out a plan with the IRS since they have prior experience negotiating with the government. For example, they may be able to negotiate a compromise offer. Here you pay a smaller lump payment to pay off a larger debt or have you put in presently non-collectible Status (CNC when you cannot pay even a minor amount). This might apply to individuals struggling due to the epidemic or for other reasons. According to Idealtax.com’s tax pros, the more important your debt, the more probable it is that an experienced attorney who is “accustomed to winning settlements” can help you.